The long, slow death of global development
americanaffairsjournal.org
americanaffairsjournal.org
https://ourworldindata.org/grapher/gdp-per-capita-maddison-2...
(edit) This is at Purchasing Power Parity, thanks to unmonk for pointing this out.
India certainly has had a substantial rise in GDP per capita, but the absolute prosperity is nowhere near $6800 GDP per capita.
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location...
In the year 2000 it was $US 442. It is now $2256 . A five fold increase.
But yes, the rise in nominal GDP per capita has indeed been very substantial (and in relative terms higher than that in PPP). It just shows a long way to go to achieve middle income status though.
https://ourworldindata.org/grapher/share-of-population-in-ex...
So we got another 40 years, till it reaches zero.
We went through two decades where many in the global intellectual class actively campaigned against industrialization, and with degrowth strategies for managing CO2 emissions being in vogue now, there is a risk that such counterproductive advocacy will continue, just as industrialization becomes increasingly harder for the reasons mentioned in the article.
I have no problem as a libertarian locking in first mover advantage, but doing it by accusing others of what you yourself are guilty of is disgustingly hypocritical. I've even come to miss the kind of hypocrisy that knows what it's saying and doing, as opposed to the kind that simply takes the status quo for granted as if it had existed forever.
If we don't get degrowth going now it's going to be too late for the world.
It's hypocritical, but also if the world is industrialized completely it won't be livable anymore.
In either case, it's the tragedy of the commons and we're all f-ed.
https://en.wikipedia.org/wiki/Economic_impacts_of_climate_ch... suggests that eg climate change's economic impact will be between 0% to 20% loss of GDP. That's a lot, but it's also only about at most a decade of growth.
It's also a lot less than the difference between the US and the UK's GDP per capita. It would hurt Americans to have to live like Brits, but British living conditions are far from an existential threat.
We could live with less, and we have to if we want to at least lessen the impact of climate change.
So we need to get a concerted effort going for degrowth in the world. But it looks like every country is still aiming for maximum industrialization and growth, which is understandable since it's individual optimization.
He thus thinks it is more appropriate to "make for India" than "make in India", the latter being the name of the initiative the current government started back in 2014 - when he was the governor of RBI. Also he has been saying it since 2014 at least, not "now" as the parent implies.
https://www.livemint.com/Politics/nEPZGnUMtLN3o86upKbPsI/Rag...
https://economictimes.indiatimes.com/news/economy/policy/the...
He's been pretty explicitly against manufacturing-led growth and in favor of services-led growth. And indeed "make for India" strategy would mean India remains a net manufacturing importer as it makes some goods for itself and imports others, without any exports to balance out the goods it cannot produce.
It is fine to disagree with him, but your logic isn't sound. I personally also think India needs more industrialisation but that's not in conflict with what Rajan is saying.
If you restrict attention to the window from 2014 to 2021, then growth in low income countries has been nil -- but the same is true from 1976 to 2001[1].
Rises in gdp per person are almost by definition technological, and the improvements in and the diffusion of tech are both hard to predict.
It's clear, though, that growth in lower income countries has been slower.
[1] https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location... [2] https://data.worldbank.org/indicator/NY.GDP.PCAP.CD
Come to think of it, neoliberalism has been unpopular for quite a while now. It's a miracle the world is broadly still as neoliberal as it is. I guess politicians fear the economic fallout from giving in to populism more than they want the short term vote gains?
It has always struck me as strange that Africa as a continent would grow its population so much without corresponding development.
Literally 4 times the wealth per person! And the effects are not just due to a small number of people or raw money alone. The infant mortality rate has dropped from 110 per 1000 live births in 2000 to just 30 in 2021 and still falling. https://data.worldbank.org/indicator/SP.DYN.IMRT.IN?location...
…as its birthrate has dropped from 5.9 per woman in 2000 to 3.9 in 2020 (and still falling fairly quickly). https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat...
There’s no reason to suspect this trend won’t continue as infrastructure is built up and these places further urbanize. In fact, some of the wealth effects are almost mechanical as fertility rates stabilize, because of the improvement in the dependency ratio.
Fertility rate is going to fall in Africa and I’ve seen no good argument for why it wouldn’t. Every trend is in that direction and every obvious force as well.
> This, it said, translates into growth per capita of 0.2 per cent in 2023 and 0.4 per cent in 2024–25, which is insufficient to reduce extreme poverty in the country.
https://www.premiumtimesng.com/business/business-news/592952...
that country grows by a Rwanda every couple of years. Sure it will probably slow down the population growth by mid- or end of this century. But the economy is not keeping up for them to get out of poverty.
The argument is based on cherry-picking arguments like that. Overall, Africa is quite rapidly developing. Not as fast as we would like, but the overall narrative of the article is cherry-picked nonsense not consistent with reality. Subsaharan Africa overall has grown in per capita gdp by about 2x since 2000. https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat...
…while its birthrate per woman has fallen from 5.7 to 4.7 (and on a steeper decline now than 20 years ago). https://data.worldbank.org/indicator/SP.DYN.TFRT.IN?location...
In fact, I’m even more confident that birthrate will fall to near replacement in 50 years than I am about development, but even if just the birthrate drops, the improved dependency ratio will just about automatically increase the per capita gdp. Africa currently has roughly twice the number of dependents-per-worker as east Asia, for instance. (Or did in 2010), and a reducing fertility rate will mechanistically improve that dramatically. That alone is good for like a 50-100% increase in per capita gdp, let alone the compounding effects of a beneficial dependency ratio.
This statement seems at odds with the rest of the piece.
The problem with manufacturing as a development strategy (and I agree with the opening - it's the only proven development strategy) is that not everyone can manufacture. You'd have too many goods!
I've always disagreed with the economic belief that demand is infinite and only constrained by supply. As others in this thread have alluded to, our material progress (as opposed to digital progress) began to slow down in the 1970s. I think part of this is that to a large extent people's material needs in developed countries were met by things like plumbing and electrification. I use developed countries here both as an example of economic trends at the frontier, and as the most likely consumers of industrial goods given their wealth.
Of course that leaves the needs of 90% of people in developing countries unmet, but as the article explains China supplied those needs after 1979. Manufacturing is efficient and one factory worker can meet the material needs of 1+N consumers.
The whole world can't work in factories because there isn't enough demand for all those manufactured goods. Just look at the global steel industry.
A lot of people are too poor to engage in global trade, and manufacturers of any extraction will not give away their wares.
Development, unlike the global phenomenon observed from 1945-1975, seems more like taking turns being the workshop of the world. 1980-2020 was China's turn.
Non native speaker here from the Netherlands. What meaning is implied in your usage of 1+N?
Within context of modern developement, i.e. post ww2, where development is rapid industrialization in a few generations, success stories are essentially the Asian Tigers who hammered export led growth to accumulate foreign reserve (usd) then spend to accumulate increasingly expensive capital to make modern goods, throw in some industrial policy to protect native industries without pissing off trade partners (almost benefactors) who can turn off the FX / even tech transfer tap. Very few developing countries have the resources to bootstrap without bringing in foreign cash to buy foreign capital to bootstrap industrialization. Otherwise they start at essentially square one, for which the products are uncompetitive enough relative to imports from sufficiently industrialized economies that there is little latent demand, unless you go NK autarky route. It's the difference between saving up for decades vs taking out a loan and starting right away.
Also every developing country needs its own base manufacturing industry in somethings to give it some degree of autonomy in deciding its own future.
(They had a bit of manufacturing, but it was mostly ill-fated. A substantial portion came from misguided attempts at industrial policy.)
It is Industrialization/Manufacturing which gives any country a stake in the Global Economic framework and hence its "worth" in the World. Note that Manufacturing in the 21st century is quite different from what it was in the 19th/20th centuries. The Covid pandemic and the Ukraine-Russia war has exposed the weaknesses in the Global Supply Chain i.e. a single point of failure due to complete dependency on a single Nation (i.e. China) and this needs to be reworked into a true distributed system. Every Nation needs a certain degree of Self-Sufficiency/Self-Autonomy to hold its own in the "New World Order". Finally Manufacturing is the driver for everything else like a)Innovation b)Productivity c)Standard of Living etc. which are at the very heart of development.
See Also:
1) Manufacturing (still) Matters (pdf) - https://australiainstitute.org.au/wp-content/uploads/2020/12...
2) https://asiasociety.org/australia/looking-ahead-manufacturin...
This is not a factor; even when there isn't any demand for more manufactured goods in an absolute sense, there's plenty of demand for increased product variety and differentiation, which requires extra labor and capital to supply.
The Covid pandemic and Ukraine-Russia war has exposed the weaknesses inherent in the "Global Economy" where a single problem affects the entire World due to everything being interlinked together. This is further intensified by the self-interest/selfishness/hypocrisy of the developed Western countries since they have managed to engineer the system to their benefit while short shrifting the developing countries.
See also all the other articles on various countries named The Developing Country Industrialization series by the same author here: https://noahpinion.substack.com/p/the-developing-country-ind...
If that's true, why? What happened in the world of atoms?
Do you have a link that would clarify?
Our technology started favoring really large companies again, ending the era of innovation that was the late 19th and most of the 20th centuries. People just can't start from nothing and create something on the real world.
Btw, I have to be skeptical of the thesis here. Certainly the tech world is not full of “overregulation”. And I think it’s quite a stretch to say “cultural fear and pessimism of science bringing doom” given the broad glowing admiration of whatever the industry hype flavor of the month is. Not to mention the cult-like levels of belief and worship among the singularity peeps et al. While back down here on earth, many of us are scratching our heads about what we can possibly do in the face of climate change, a polarizing and surveillance enabled internet, millions of lines of technical debt that have little chance of keeping a persistent cyber threat at bay, and various other second order networks effects that we never seem to foresee in our first order money opportunities. Heck, I’ll throw in one more that certainly has been a cultural trope for a while but prob isn’t given enough airtime these days. If you take the recent advancements in drones (swarms especially), autonomous vehicles, near realtime satellite imagery and internet communications… and link that up with a current global geopolitical trendline that’s clearly not looking overly rosy… you’re racing directly at the Skynet-ish scenario cliche of autonomous machines that kill. I don’t think that swarms of cheap drones will allow us to keep the man-in-the-loop control given a global race to the bottom. And I say these things as an MBA and former army officer who would prob have laughed at these claims even 10 years ago.
Heck, I’ll go ad hominem here. Given that I have libertarian leanings myself, Thiel does seem to come across as someone who has made his money in an industry gone south, but now simply doesn’t want to pay his taxes.
Apologies… that escalated kinda quickly. I actually started this diatribe intending to ask for clarification. And perhaps you were merely stating Thiel’s thesis and my ire is completely unjustified.
But apparently these days I have little patience for the weak sauce party lines that have been parroted for decades.
~ edited for an egregious typo
Luckily, yes. But lots of other sectors of the economy are.
And nothing happened in the world of atoms, it's just that the first somewhat useful things spawned by the world of bytes appeared in the mid-70s or so and, bytes being so much more tractable, capital and intellectual energy started flowing to that world in massive amounts.
Growth in terms of $ equivalent, adjusted for inflation: even for the mere world of atoms, this is untrue. Global GDP roughly dectupled from 1950 to 2008 and there's no way that's solely attributable to digital services.
To take one perhaps naive interpretation:
For example, encyclopedias used to be sold as a collection of dozens of heavy volumes. Producing them was a lively business.
Nowadays, everyone gets free access to Wikipedia, which has more content than your shelf of Encyclopedia Britannica could ever hold and gets updated all the time.
When you bought Encyclopedia Britannica that showed up in gdp statistics. Wikipedia doesn't.
Regulatory regimentation by centralized authorities. Just one of many examples: 5 percent of occupations required a license in 1950. Today, around 30 percent.
In every sector, professional and industry groups have become adept at locking down the market by manufacturing consent for regulatory restrictions. See what the Hotel Lobby did to stem the disruptive potential of Airbnb:
https://www.nytimes.com/2017/04/16/technology/inside-the-hot...
In the housing market, the effect of mounting regulatory regimentation resulted in the US having an estimated 36 percent less GDP growth between 1964 and 2009:
This is mental gymnastics done to dispel evidence that goes against the cynical anti-capitalist ideology that is so in-vogue.
The poverty line in question does, contrary to this claim, "measure [some]thing meaningful about real graduation from poverty".
If the author contends that living at the $2.15-a-day threshold is an abysmal quality of life, then what does he imagine living at below that threshold to be like?
Does he imagine that it's all indistinguishable anguish at those levels, and therefore that living on $2.50 a day is no improvement over living on $1.25 a day? Nothing could be further from the truth. At extreme levels of poverty, a 50% or 100% increase daily purchasing power is often the difference between life and death.